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  • U.S. Poised To Retake Status As Net Petroleum Products Exporter [View article]
    Your post is total mis-information. The U.S. will never be a net exporter of crude oil. Get your facts straight and stop publishing lies that ignorant people believe to their compounded ignorance.

    See my posts:
    http://bit.ly/ujsRfA
    http://bit.ly/v9AS5Q
    Dec 24 04:54 AM | 2 Likes Like |Link to Comment
  • U.S. Poised To Retake Status As Net Petroleum Products Exporter [View article]
    You say that you are going to change your post yet it continues and is pure mis-information. Ignorant people are responding as if the U.S. is going to become a net exporter of crude oil when this is never going to happen.

    Please see my posts: http://bit.ly/ujsRfA and http://bit.ly/v9AS5Q.

    You must stop writing about things that you do not understand.
    Dec 24 04:51 AM | 2 Likes Like |Link to Comment
  • Who Should an Investor Believe: The Natural Gas Industry or The New York Times? [View article]
    BillJK,

    I agree. The industry has itself to blame for low natural gas prices. Live with it and find a way forward. If you are such awesome businessmen, behave accordingly. If not, take the heat.

    Art
    Jul 9 05:45 PM | 1 Like Like |Link to Comment
  • Who Should an Investor Believe: The Natural Gas Industry or The New York Times? [View article]
    I think that Old Wizard's comments are worth thinking about.

    Norm903's idea that we can produce as much oil and gas as we like at some price ignores the fundamentals of how the global economy works. The worldwide movement of goods and services is based on the assumption of cheap energy. If energy is expensive, the whole system breaks down.

    Our present economic crisis is blamed on sub-prime banking shenanigans, but don't forget that oil prices reached $147 per barrel in June 2008 as the world economy collapsed. Rising oil prices produced inflation of 5% which increased monthly payments on adjustable rate mortgage loans which, in turn, triggered defaults. The sub-prime mortgage crisis cannot be divorced from oil price and its effect on the world economy.

    So, the idea that we can continue to produce more oil and gas as long as the price support is there, does not account for the negative effect of higher energy prices on the economy.

    Nasdaqwoody complains about getting a lesson in economics from an English major. I don't know who he refers to, but my degree is in geology and my career has been focused on energy. He may not like the message but he should pay attention.
    Jul 4 08:40 AM | 3 Likes Like |Link to Comment
  • Who Should an Investor Believe: The Natural Gas Industry or The New York Times? [View article]
    How will you get electricity to make comments on the internet?
    Jul 3 08:22 AM | 3 Likes Like |Link to Comment
  • Who Should an Investor Believe: The Natural Gas Industry or The New York Times? [View article]
    Karl-seeking,

    Why would CitiGroup, Lehman, Bear Stearns, etc. risk their future in subprime securities if this were not a great opportunity?

    Sorry, but this argument is not persuasive. Just because others are doing something, doesn't mean it is smart. You have to do the research (yourself!), do the reserve forecasts, do the economics, and then decide.

    I have done all of these painfully and tediously with my reservoir engineer colleague, and I assure you that criticizing the NYT or relying on "smart" industry analysts will not help you get to the truth. It may feel good and may be dead-on too, but it does not answer the questions about shale gas commercial viability.

    The idea that higher gas prices will save the day has serious problems also. First, a huge component of present gas demand is coal-to-gas switching due to low gas prices. If gas prices increase above about $5.35/mcf, gas-to-coal switching begins and that will take a mighty chunk out of gas demand thereby reducing price.

    Also, in my 33 years in the oil and gas business, I assure you that service and material costs (rigs, pipe, frack crews, logging units, etc.) always accelerate faster and higher than product prices.

    Net present value is also an issue. The industry has spent 100s of billions and continues to spend at a frantic clip to produce gas into a $4-4.50 market where they lose money. Assuming price increase is one dimensional (i.e. costs don't increase as price does), how will they ever dig themselves out of the present value hole they have dug when wells produce half their reserve in the first year and three-fourths in the first 3 years?

    Back of the envelope money-on-money calculations don't get us where we need to be. We must think discounted cash flow, 25% royalty off the top, severance tax, lease operating expense, gathering and transportation, overhead cost, debt service, etc.

    When you have done this work and incorporated all of the messy details of cost, you will see that the outcome is, at best, uncertain.
    Jul 2 11:03 AM | 2 Likes Like |Link to Comment
  • Who Should an Investor Believe: The Natural Gas Industry or The New York Times? [View article]
    Forget about the New York Times and do the numbers. You are financial experts.

    Where are the retained earnings for the companies in the shale gas plays?

    Why have the 10 leading companies in the play written down $60 billion is capital value in the last two years?

    Why are they continually selling money-making assets to fund the ongoing drilling?
    Jul 1 11:00 AM | 4 Likes Like |Link to Comment
  • Shale Gas 'Revolution' Could Turn Out to Be Mammoth Spin Job [View article]
    I have published and spoken widely on the shale gas phenomenon and, if fact, gave Henry Groppe the technical basis for his opinion about the over-stated reserves and under-stated costs of shale gas.

    Please see by blog: petroleumtruthreport.b.../ for more details.

    Arthur Berman
    Jun 14 12:27 AM | 3 Likes Like |Link to Comment
  • Quicksilver Resources' Barnett Shale Gamble [View article]
    Eric,

    I forgot to address the part of your question about EOG. EOG is one of the
    best of the (bad) lot on unconventional plays. I don't know that much about their participation in the overall Barnett Shale play, but I did an analysis of Tarrant County last April (Tarrant County has some of the "best" core production--that's where Chesapeake paid $20k/acre for the DFW Airport leases).

    In that analysis (using $6.25/MMBtu gas price--a dream today), these were the results for percent of wells by operator that met economic threshold:

    Encana 41%
    EOG 39%
    XTO 39%
    CHK 25%
    Devon 19%

    Those "success" rates (I cannot imagine justifying wildcat wells based on a 20% or lower success rate, and this is field development!) are against a background of an average of 25% payout by all operators, not just the 5 that I listed.

    I think that EOG shifted its focus to the more oil-prone, less thermally mature part of the Barnett after I did that study. That seemed like a good idea when oil prices were above $125/barrel, but probably doesn't look so good now. The problem with the oil play is lower relative permeability to oil vs. gas (it's a bigger molecule to fit through tiny pores), and lower porosity because of some kerogen conversion volumetric factors that you certainly would not be interested in!

    I do not invest in oil and gas companies but, if I did, I would choose ExxonMobil and stay away from the amateurs!

    AEB
    Mar 6 11:16 AM | Likes Like |Link to Comment
  • Quicksilver Resources' Barnett Shale Gamble [View article]
    Eric,

    I forgot to address the part of your question about EOG. EOG is one of the
    best of the (bad) lot on unconventional plays. I don't know that much about their participation in the overall Barnett Shale play, but I did an analysis of Tarrant County last April (Tarrant County has some of the "best" core production--that's where Chesapeake paid $20k/acre for the DFW Airport leases).

    In that analysis (using $6.25/MMBtu gas price--a dream today), these were the results for percent of wells by operator that met economic threshold:

    Encana
    Mar 6 11:08 AM | Likes Like |Link to Comment
  • Quicksilver Resources' Barnett Shale Gamble [View article]
    Devon currently operates about 3,300 wells in the Barnett Shale, and most of these are marginally commercial or non-commercial. Devon acquired Mitchell Energy's position in the Barnett, and Mitchell began the play. Devon's error, therefore, was not buying into the play after prices and costs had soared like Quicksilver. Devon's mistakes are over-exposure to the play, and some fundamental inability to address the commercial realities of shale gas. In the current issue of the AAPG Explorer, there is an interesting article (www.aapg.org/explorer/...) about a University of Oklahoma study of the geology and geophysics of the Barnett Shale sponsored by Devon. Maybe they realize at this late date that fundamentals must be addressed. If so, good for them, but perhaps not so good for shareholders that have already lost value.

    Devon, of course, is a competely different type of company from Quicksilver. Devon is a global independent with broadly diversified assets, so perhaps they can absorb losses in the Barnett Shale. On the other hand, their cost structure is much higher than a company like Quicksilver, meaning that it takes larger resources and more profit to pay for the overhead of all of those people who don't contribute to the core business of finding oil and gas.

    If you haven't already browsed to my blog, I have a thorough explanation of what I think is going on in shale plays: petroleumtruthreport.b.../ . It is a bewidlering phenomenon because these plays make little commercial sense, yet investors are happy to shovel billions into them.

    AEB
    Mar 6 10:48 AM | Likes Like |Link to Comment
  • Quicksilver Resources' Barnett Shale Gamble [View article]
    Quicksilver has been active in the Barnett Shale play since 2003, and began drilling in January 2004. There was no 2008 "foray" , just a badly-timed expansion in the "core area" of the play.Quicksilver had focused on the surrounding counties (mostly Hood and Hill counties), but had acreage and drilled wells in the core area in Johnson and Tarrant counties also since 2004. If there was a foray, it was into Denton County where they had not been active before.

    Regarding all the negative reactions to Vanderveen's implied criticism of Quicksilver, I think that he is right on. Hedges notwithstanding, how stupid is it to buy into the most overpriced acreage in the play at the highest price-point in the market, and then watch gas prices lose 2/3 of their value? If that is good management, I would love to see an example of poor management!

    It amazes me how many people--inlcuding the many bloggers who jumped all over Vanderveen's observations--with investment backgrounds think that they know anything about the oil and gas business. I wonder why you guys don't talk to people inside the industry--like geologists?

    I am a geologist, and I have struggled to understand the fascination of the investment community with shale plays. I think that they are all stock scams, in which the executives of public companies get rich because people who don't know anything about oil and gas buy stock and inflate its value (in better times). I've been in oil and gas for 31 years and wouldn't advise anyone to put a nickel in the Barnett Shale geologically or economically. Take a look at Quicksilver's debt sometime, then ask how many of their wells will ever break-even, much less make money. You will be amazed!
    Mar 6 07:10 AM | Likes Like |Link to Comment
  • Energy Independence: It's About Demand, Not Supply [View article]
    Whenever a politician talks about energy independence as something possible in the next 25 years or less, you know he/she is a liar (or hopelessly misinformed). The U.S. is the most mature petroleum province on earth (and still the 3rd biggest oil producer!), and there is just not much probability of finding huge new reserves here.

    What's wrong with being energy dependent anyway? I don't hear anyone calling for coffee independence. The whole nature of trade is that I have something that you need, and you have something that I need. This is good and healthy.

    The perception that imported oil is mostly from the Middle East is not really correct. We import 20.3% of our oil from Canada, 20.1% from the Persian Gulf countries, 12.3% from Saudi Arabia, 10.8% from Mexico, 9.4% from Nigeria, 8.2% from Venezuela, and 6.2% from Iraq.

    Even if you take the most optimistic view possible of areas in the U.S. that are currently closed to exploration, they still won't make us energy independent. Don't misunderstand me--I think we should drill in these areas. Just don't expect that we will find something so big that we won't have to import oil.

    ANWR has been evaluated over and over by oil companies and it doesn't look that good (the USGS estimate of 15 billion barrels is limited to "technically recoverable" and not commercial oil--if it is scattered in many smaller pools none of it will be commercial).

    The offshore East Coast has been drilled before it was off-limits and was considered a dog by the industry. Offshore California has some promise as does the eastern Gulf of Mexico but the probable reserves are not enough to make the U.S. energy independent.

    Conservation makes great sense but it won't make us energy independent because we use so much energy. Alternate fuels make great sense but none of them are ready commercially for at least 25 years. Building more fuel efficient cars is great (I think we already do a lot of that but people have preferred SUVs, etc.) but it takes a long time before we get all the less efficient cars off the road.

    So, let's stop this energy independence talk. We should do anything and everything to be smarter about how we get and use energy, but let's be practical and realize that energy independence is not real in the near-term, as much as we want it to be!





    Sep 6 09:50 AM | Likes Like |Link to Comment
  • Unconventional Energy Still Attractive - UBS [View article]
    UBS' opinion is typical of analysts who know very little about the reality of the oil and gas business. $9/Mcf is not valid since the average spot price was $7.30 (Henry Hub) this week and plunging. The average U.S. wellhead price fell $2.30 in August compared to July to $8.32/Mcf and it will be much lower for September.

    At these prices, none of the great shale plays are commercial. That is why Chesapeake has been having a fire sale on its leases in the Haynesville, Woodford and Fayetteville shales. Barnett Shale production in Q2 2008 had fallen 20% from Q3 2007 before the fall in gas prices because of perceived higher unit prices in Haynesville and Marcellus.

    If drilling and leasing in the shale plays declines as it should, gas prices may rise but it will take a few quarters before this is felt.

    As an industry insider, I like natural gas plays but there are hard times ahead for the companies involved in the shale plays. They paid too much for new leases and deals when gas prices were high (Plains paid $30,000/acre in the Haynesville!), and are using borrowed money to drill. They all have huge quarterly debt service and hedging losses so far in 2008 (Chesapeake's long-term debt was more than $13 billion before they started selling, and the company is only worth about $3.5 billion).

    So I hope UBS is right, but it's hard to see what they based their positive opinion on. Does anyone think there might be something in it for them if a lot of people buy gas company stocks through them based on their advice????
    Sep 6 09:18 AM | Likes Like |Link to Comment
  • Time To Consider Oil's Homely Cousin, Natural Gas [View article]
    The main factor in the drop in natural gas price is the huge increase in domestic production. Production is up almost 8% or 5 Bcf per day in the 1st half of 2008 compared to the same period a year ago. This has produced the perception that there is an over-supply of gas.

    The proliferation of new shale gas plays, like the Haynesville and Marcellus, has enhanced this perception. The average U.S. wellhead price for natural gas fell $2.30 from July to August to $8.32/MMcf.

    At this price, none of the shale plays are commercial. Barnett Shale production had already fallen 20% in Q2 2008 compared to its peak in Q3 2007. This will eventually increase gas prices after the lag effect.
    Sep 6 09:02 AM | Likes Like |Link to Comment
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